Recession fears were heightened yesterday after a key report revealed a shock fall in manufacturing activity, sending the pound plunging.
The slide in the closely-watched purchasing managers’ index coincided with figures showing that mortgage approvals had fallen unexpectedly at the start of the year.
Sterling dropped below $1.50 for the first time in more than two-and-a-half years. It touched $1.4999 at one stage before edging back up, while the pound also fell against the euro.
The flurry of grim data will dent hopes that the UK economy can return to growth in the first quarter of this year after a contraction of 0.3 per cent in the closing months of 2012. Two consecutive quarters of falling GDP would mark an unprecedented triple-dip recession.
Scotiabank economist Alan Clarke described the manufacturing and mortgage figures as a “double whammy of disappointing news”.
He said: “Not a good start [to the year] and really shouldn’t change anyone’s view that there’s precious little growth momentum in the UK and particularly not in manufacturing.”
The Markit/Cips manufacturing PMI fell to 47.9 last month from a downwardly revised 50.5 in January, confounding forecasts for a rise to 51. It was the first reading below the 50 line that separates growth from contraction since November.
But Howard Archer, chief UK economist at IHS Global Insight, said signs that eurozone activity bottomed out around October did offer some hope for UK manufacturing exporters.